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HSBC's MPF fund is great for HSBC

Howard Winn

BIO

Howard Winn has been with the South China Morning Post for two and half years after previous stints as business editor and deputy editor of The Standard, and business editor of Asia Times. His writing has also been published in the Far Eastern Economic Review, the Wall Street Journal, and the International Herald Tribune. He writes the Lai See column which focuses on the lighter side of business.

Recently we noted the lamentable performance of MPF funds over the past 12 years - an average of 16.75 per cent, compared with the tracker fund, which has gained 75 per cent over the same period. A reader has complained to us after scrutinising his HSBC North American Equity Fund. This MPF fund provides exposure to US equity markets at a cost of 2 per cent a year, which is not cheap given that the SPY US index tracker charges 0.19 per cent a year. The largest component of this fund is the HSBC Index tracker - American Index fund (14.6 per cent of the fund). Looking at the HSBC American index tracker in more detail, we see that it charges 0.53 per cent. So, HSBC charges those that invest in its MPF vehicle 2 per cent per annum to buy another HSBC tracker that itself charges 0.53 per cent. It's not hard to see who's benefiting from this cosy arrangement. Then if we look at the largest holdings of the HSBC's US tracker fund (Apple, IBM, Chevron, Microsoft, AT&T) we see there is a remarkable similarity to the largest holdings in HSBC's North American MPF vehicle. So HSBC's MPF vehicle buys its own tracker fund (thus increasing its fee income) and then buys further US stocks that more or less replicate the tracker fund. The term "ripped off" comes to mind.

Shanghai one up on HK
Shanghai is upping the ante in its efforts to improve its air quality. Starting this month, the city will gradually start eliminating heavily polluting clunkers that environmental protection officials say produce at least half of Shanghai's roadside pollution, the Shanghai Daily reports. There are some 230,000 old vehicles, making up about 12 per cent of Shanghai's locally registered vehicles. These vehicles will be phased out by 2015 but the earlier the owners take them off the road, the bigger the subsidy they will get from the government. Owners of private cars will be offered 3,000 yuan (HK$3,700) to 32,000 yuan, officials say. Also, buses that travel between provinces are entitled to subsidies. But the subsidy will fall by half after 2014.
This is a carrot-and-stick approach to the problem - an approach Hong Kong would do well to adopt, instead of pussyfooting around various vested interest groups.

Europe lost in translation
Europe and its future, whatever form that may take, are uppermost in the minds of those concerned with what may happen to their investments over the next year or so. The European Central Bank has been at the heart of this. So, when the president of the ECB, Mario Draghi, recently wrote an editorial in German for Die Zeit explaining the new course of the bank, there was an interesting sentence in which he talked of the development of the political union, "to expand the democratic participation and to include citizens more effectively in the process [of political integration]". An English version of his piece was subsequently circulated that makes no reference to integrating citizens into the discussion. It refers only "to better anchor European processes at the national level". One observer has pointed out that this discrepancy is not merely a matter of semantics but goes to the core of one of the deficiencies of European policymakers: the lack of communication of policies to citizens. Draghi's editorial addresses that head-on but other policymakers must also communicate better. Our observer adds that most European leaders bicker with their colleagues, but don't take enough time to communicate with their constituents. "It's a key reason why Europeans can't relate to European institutions."

Karaoke can kill
Visiting a karaoke lounge can be dangerous. A family outing to a karaoke lounge in Xian, Shaanxi, recently became discordant when some family members felt that a four-year-old was hogging the microphone and berated the little emperor's parents. A fight broke out, resulting in two deaths, The Daily Telegraph reports.

In the Philippines, the Frank Sinatra song My Way has been removed from many song books after poor renditions led to numerous killings. In Thailand, a man shot eight of his neighbours after tiring of their ghastly reprisals of John Denver's Take Me Home, Country Roads. In the United States, a woman punched a man after he continued singing Coldplay's Yellow after she told him he was not up to the task.

Contact Us Have you got any stories that Lai See should know about? E-mail them to howard.winn@scmp.com